Eastern Enterprises has three departments; Welding, Assembly and Spraying . Welding calculates its predetermined overhead...
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Accounting
Eastern Enterprises has three departments; Welding, Assembly and Spraying
.
Welding
calculates its predetermined overhead absorption rate based on machine hours; Assembly is based on direct labour hours while Spraying is based on direct labour cost. On 2021 January 01, the company had the following estimates:
WELDING
ASSEMBLY
SPRAYING
Production overhead costs
$720 000
$700 000
$120 000
$412 500
Direct labour cost
$35.000
$150 000
Machine hours
36.000
2.500
5.000
Direct labour hours
4.000
20 000
8.000
The labour rate is $150 per hour for all departments.
Job 303A which was started and completed during the year showed the following:
WELDING
ASSEMBLY
SPRAYING
Direct material
$5 500
$7 200
$9.500
Direct labour hours
80
150
100
Machine hours
800
100
50
Rental of equipment for job 303A will amount to $35 275.
Additional Information:
Eastern Enterprises recovers selling, distribution and administrative overheads at a rate of 20%
of production costs and profit is based on a margin of 20%.
A. Compute overhead absorption rates for each department.
B. Calculate the cost of Job 303A, clearly showing expected profit and selling price.
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